How CircleUp Credit Advisors Uses Helio to Help Entrepreneurs

Talk to any small business owner in the U.S. today and they’ll tell you about how hard it is to get a loan. Obtaining a line of credit can be difficult for any entrepreneur and consumer businesses are no exception. CPG companies are often asked to pay their suppliers well before they get paid by their customers, which creates what is known as a working capital gap or “cash crunch.” They need money to fulfil an order, but don’t get paid until months after the order is delivered. Many traditional lenders won’t even consider lending to cash flow negative businesses because it’s perceived as too risky.

After years of working with high growth consumer companies as they raise equity, it became increasingly clear to us that the credit financing options in the market weren’t cutting it. That’s why we launched CircleUp Credit Advisors. We now extend revolving lines of credit (typically $20k – $1M) backed by a company’s working capital assets, which include accounts receivable (AR), purchase orders (POs), and inventory. CircleUp Credit Advisors is changing the small business lending landscape – with transparent rates, low-friction onboarding, and no lock-in period.

Most asset-backed lenders don’t play in this space because the cost of acquiring, underwriting, and onboarding loans below the $1M threshold just isn’t scalable. It’s the classic Innovator’s Dilemma– lenders quickly march up market to serve more lucrative customers, which leaves a financing gap for early-stage businesses. Helio is what allows us to fill this gap.

Helio is our machine learning platform that lowers CircleUp Credit’s cost of identification, underwriting, and servicing, enabling us to offer larger lines, at lower rates, than others in the market. Let’s take a closer look at the value of Helio along these three dimensions:

Identification

Industry norm – Most lenders are dependent on trade shows, brokers, and purchased lists to identify their borrowers. These approaches drive up customer acquisition cost and require higher rates or larger loans to rationalize costs.

CircleUp Credit – We use Helio to identify the right companies at the right time, with very little cost. Of the 1.3 million companies tracked in Helio, we can filter for company size and sub-industry to best match our product – this yields hundreds of thousands of prospects. Our algorithms will then flag companies as they enter new retailers and build distribution – a sign that they will need working capital.

Underwriting

Industry norm – It can often take lenders 2-6 months to underwrite a $250k line of credit, which is very cumbersome. Think warehouse site visits (paid for by the potential borrower), manual invoice verification, and countless document requests. Ultimately, most early-stage companies will be turned town.

CircleUp Credit – We can fund in as little as two days once we’ve received a company’s materials – and we typically provide a larger line than others given our information on the market overall. Helio enables this expediency as some of the retailer verification work is already complete. Additionally, many of the outputs from Helio act as early filters and allow for almost instantaneous pre-approval.

Servicing

Industry norm – With growth comes a need for additional financing, which can be an operational nightmare for small businesses. Most lenders have line caps and minimums, which can limit growth and add extra fees.

CircleUp Credit – We have worked to streamline the redraw process to a same-day wire. Without defined line caps or minimums, the financing mirrors the needs of the business.

Helio leads the way

We are working towards a model where Helio will also let us help entrepreneurs after we have already extended them a loan, something that most lenders wouldn’t even consider. We’ll be able to bring these entrepreneurs data and insights from Helio that help their businesses grow.

Helio is by no means perfect. Occasionally, it will make a mistake like classifying a company in the wrong category, but these missteps are what train the machine learning algorithms and make them better. The algorithms become more precise every day and the technology that drives down the cost of capital for our borrowers will only continue to improve.

By focusing on consumer businesses, CircleUp Credit Advisors is able to create an underwriting model that fits the needs of our borrowers rather than a one-size-fits-none lending product.

Twitter Feed

About The UpRound

The UpRound features blog posts, podcasts, and webinars on consumer industry trends, the evolution of private investing, and how to succeed as a consumer entrepreneur, along with general CircleUp news. Your time is valuable — so we deliver the maximum amount of insight in the most concise format.

Important Disclosure: CircleUp.com is a website operated by CircleUp Network, Inc. By accessing this site and any pages thereof, you agree to be bound by its Terms of Use and Privacy Policy. All securities related activity referenced on this site as “marketplace” activities were conducted through Fundme Securities LLC, a wholly owned subsidiary of CircleUp Network, Inc. Fundme Securities LLC is a registered Broker/Dealer and member FINRA/SIPC. Any fund vehicles or fund related activities referenced on this site are separately managed private venture capital funds managed by CircleUp Advisors, LLC, a wholly owned subsidiary of CircleUp Network, Inc. CircleUp Advisors, LLC advisory services are separate and distinct from the marketplace investment platform. All lending related activity referenced on this site are offered through CircleUp Credit Advisors, LLC, a wholly owned subsidiary of CirlceUp Network, Inc. Loans are made by an affiliate of CircleUp Credit Advisors LLC, CIM CU-I LLC. Loans to California-based companies are made pursuant to its California Financing Law (No. 60DBO-69106).